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Over-savings and hyperbolic discounting

  • Salanie, Francois
  • Treich, Nicolas

Hyperbolic discounting models are widely seen as implying that consumers do not save enough, in accordance with the observed low rates of savings of some households. This paper qualifies this view by showing that hyperbolic consumers may ‘oversave’ in the short run. The result extends to uncertainty on future income and does not depend on whether preferences are present-biased or future-biased. A generalized comparative statics analysis of self-control is introduced, and its relationship to the analysis of uncertainty on discount factors is emphasized.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 50 (2006)
Issue (Month): 6 (August)
Pages: 1557-1570

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Handle: RePEc:eee:eecrev:v:50:y:2006:i:6:p:1557-1570
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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